While many organisations already track holiday entitlement in practice, from 6th April 2026, there is a new, explicit legal duty to keep “adequate” records of workers’ annual leave and holiday pay.
This is set out in Section 35 of the Employment Rights Act 2025 (ERA 2025) and is the first time UK law has imposed a standalone statutory record keeping duty for annual leave and holiday pay. Employers who are not compliant with the new law could face criminal liability, enforcement action from the newly-established Fair Work Agency and the risk of reputational damage.
Doubtless, many employers are now looking at their records and wondering whether they fall under the definition of “adequate”. They will also be asking themselves what they need to do now.
What does the law say?
Under Section 35, all employers have a duty to keep records demonstrating compliance with workers’ statutory holiday rights under the Working Time Regulations 1998.
This obligation is a broad one. The records kept must show the employers have complied with:
- Workers’ statutory annual leave entitlement (currently 5.6 weeks)
- Entitlement to additional leave, where applicable
- Holiday pay calculations, including the elements of pay included
- Any leave carried forward between leave years
- Payments in lieu of untaken statutory leave on termination of employment
Importantly, the law applies to all workers, including:
- part-time staff
- irregular hours and part-year workers
- zero-hours workers
It is worth noting that Section 35 introduces a new regulation, 16B, into the Working Time Regulations which creates the new duty.
When does the new duty apply?
The duty came into force on 6th April 2026, following a late commencement order to activate Section 35. This means that employers will have had little advance warning. There are no transitional provisions, so organisations are already expected to be compliant.
What does “adequate” records mean in practice?
No rigid format is set out in the legislation. Section 35 says that records can be:
“created, maintained and kept in such manner and format as the employer reasonably thinks fit”
In practical terms, that means records should be:
- Complete – showing entitlement, leave taken, pay paid and remaining balance
- Accurate – especially in holiday pay calculations and reference periods
- Traceable – auditors or inspectors can follow how figures were calculated
- Accessible – capable of being produced promptly if requested by regulators
Section 35 says that records must be retained for six years from the date on which they are made.
How can employers keep these records?
As mentioned above, there is a degree of flexibility over the format in which these records can be kept “in such manner and format as the employer reasonably thinks fit”
Records can be kept:
- Digitally (HR or payroll systems)
- Via spreadsheets
- On paper (though this will increase administrative risk)
The good news is that most employers already hold much of this data in payroll or timerecording systems. The key point is ensuring all required information is captured and retained in one coherent audit trail.
Employers must also ensure records are handled in accordance with UK GDPR obligations, particularly around retention and security of personal data.
Enforcement and penalties
Failure to keep “adequate” records is classified as a criminal offence, punishable by a fine (which may be unlimited).
As mentioned above, enforcement responsibility will sit with the Fair Work Agency. While not all of its enforcement powers may be active immediately, employers should assume that recordkeeping compliance will be scrutinised once the agency is fully operational.
Crucially, if an employer cannot produce adequate records, the burden of proof may fall against them in disputes over holiday pay or entitlement.
Action points for employers
To manage risk and demonstrate compliance, employers should act now.
1. Audit existing systems
Look at how annual leave and holiday pay are currently tracked. Identify gaps, particularly for irregular hours and partyear workers, and remedy that as soon as possible.
2. Document holiday pay calculations
Make sure records clearly show how “normal remuneration” has been calculated. This will include overtime, commission or allowances where relevant.
3. Centralise records
It is likely that a lot of records will be spread out between HR, payroll and line managers. A single, consistent recordkeeping process reduces risk and means that if information is needed, it can be collated quickly.
4. Set retention controls
Systems need to retain holiday records for at least six years. Ensure that their retention controls are configured accordingly. Put system safeguards in place for data protection compliance and check with a data protection specialist if there is any uncertainty.
5. Train managers and payroll teams
Team members who approve leave or process pay need to understand the importance of accurate and consistent records. Put training in place to ensure they do.
